Small industries hit by production slump, job generation dips

New Delhi, Aug 10 (IANS) Hit by the economic slowdown in the first quarter of the current fiscal, the contribution of small scale industries (SSIs) to manufacturing and employment generation slipped by 10 percent and seven percent respectively, said a report by an industry lobby. “The industry has faced a slowdown as domestic large and medium industries have commenced sourcing their inputs through cheaper imports,” said the report by the Associated Chambers of Commerce and Industry of India (Assocham).

“SSIs have not been able to assure their old time vendors supplies at affordable rates because majority of them could not upgrade their machinery and equipment due to high cost of borrowings,” it said.

Due to this situation, the competitiveness of SSIs has eroded to a great extent, Assocham added.

Releasing the report Saturday, Assocham president Sajjan Jindal said: “SSIs have been encountering a gloom period, beginning first quarter of current fiscal as its contribution to manufacturing has come down to 35 percent compared to around 45 percent a few months ago.”

“The number of SSI units in 2007-08 were estimated at 4.4 million with employment capacities for nearly 23.8 million workers with their output to manufacturing measured at Rs.14 trillion ($333 billion),” he said.

“As a result of deceleration that the SSI sector has been witnessing, the number of units in SSIs have come down to around 4 million by now and employment generation has shrunk to 22.5 million workers and their output to manufacturing has come down to Rs.12 trillion,” Jindal added.

“In the absence of any visible policy decisions, their export potential which used to be between 40-45 percent for many years, would decline by seven-eight percent in current fiscal,” he said.

“Expansion in most of SSI units have come to virtual halt and plugged employment opportunities. The credit extension is very high cost and their delivery mechanism too is faulty. With these impediments continue, the SSIs would find it extremely difficult to compete with their counterparts,” the report said.

“Most enterprises in this sector are more product and technology-oriented than market-oriented. Moreover, the lack of managers with international experience and foreign language skills is another hindrance in their growth,” it added.